Daily Intraday Volatility: 15.96 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators turned slightly negative last week, with MACD turning down and SPX falling slightly below its 50-day moving average. In addition, investor sentiment is at sky-high levels, and few investors feel anything but overconfident. If the market does pull back, investors are certain it will “come back” as it’s done several times in the past. What a recipe for trouble!

In reality, no one can predict what the market will do this week except to say that volatility has returned. With a number of geopolitical events swirling around, and a number of Fed members speaking on Monday night, anything can happen. With the market at all time highs, it’s not a bad idea to increase cash levels (no, it does not mean to sell everything).

A number of analysts I follow did turn short-term bearish over the weekend, and although the market could test all-time highs, the odds are good we’ll go lower during the week, but I wouldn’t bet the mortgage or rent on it.

Bottom line: The increased volatility has made predicting extremely difficult, especially intraday. I’ll be watching to see if the Fed says something sweet on Monday night to rally the markets higher on Tuesday (or so investors hope). I’ll also be watching to see if the 50-day moving average can hold. If not, it could get ugly very fast.

Daily Intraday Volatility: 16.04 (Bearish). Volatility is still low although there were a number of intraday spikes last week.

Comment: The indicators above turned from bullish to neutral or bearish, which is reflected in the Sunday night futures market (-1%). Last week was not pleasant for the bulls, and would have been worse except for a last-minute save by the White House (who said the talks with China are going well) on Friday afternoon.

So now we have an overbought market, conflicts with China, Iran, and Venuzuela, and a lack of buyers. At the very least, we should have a volatile week. At worst, it could get ugly. The bulls will be hoping for an afternoon save on Monday, but it’s unlikely anything but a true agreement with China will appease the global markets.

What to look for: See if the S&P 500 can remain above its 50-day moving average this week. If it can’t, the 100- and 200- are within reach in the coming weeks.

Bottom line: Prepare for higher volatility and a potential selloff, if only for a week. This is not necessarily the start of a bear market, but it’s obvious the bull market is nearing an end (but it likely has a few more moves left before it finally says goodbye).

Daily Intraday Volatility: Low (VIX remains in the basement at 12.87 with a spike expected on Monday morning)

Comment: The market indexes hit all time highs on Friday after a couple of rough days midweek (perhaps because the Fed didn’t lower interest rates). On Friday, as the bulls celebrated, few took money off the table except for millions of mutual fund investors who keep cashing out every week. In fact, based on my analysis and some excellent articles from Lance Roberts and Wolf Richter (and others), it appears as if stock buybacks are primarily keeping this market elevated (along with the buy-on-the-dip algos). Even more scary, the market hit its all time highs on extremely low volume and plenty of hubris. Early in the week, RSI hit 74, which was a flashing red warning sign, and sure enough, the market fell, bringing RSI back to earth (but still overbought).

Based on the Sunday night futures market, the indexes will open 2% lower. Of course the buy on the dippers will enter sometime in the first hour, and that’s when it will get interesting. It’s unknown right now if the market will continue plunging, or if it recovers before lunch. If it starts to get ugly, either the Fed or the White House should step in with positive announcements. One day this blatant manipulation won’t work, but for 10 years, it has, so plan accordingly.

Bottom line: This is not the time to declare that the bull market is over, but that day is coming sooner rather than later. Nevertheless, one Monday morning selloff means little right now. However, pay attention to the market close for clues as to what might happen the rest of the week. As a trader, I’m just glad volatility has returned, if only for a few days.

Comment: The S&P 500 nudged its way higher to all-time highs last week with SPX touching 2940 before retreating slightly. The big money was made in individual stocks (with a number of winners and losers) while volatility in the indexes remains extremely low.

This is the week of the Fed meeting and it should be interesting. Although GDP was a strong 3.2, a number of experts proclaim the number is actually much lower (based on the way inflation is calculated. More on this later). The indexes did rise near the end of the day on Friday but it wasn’t a huge rally. Bond market yields got crushed (and bonds rallied), which is a clue the bond market doesn’t believe the economy is as strong as advertised.

And that is why the Fed meeting will be very interesting. There are rumors the Fed might actually cut rates at this coming meeting. No one knows for sure what they will do, but it’s unlikely they will raise rates (according to the experts). All we can do is watch and wait.

With the market at all-time highs, with RSI telling us the market is extremely overbought, and with investors bullish again, it wouldn’t take much to send this market lower. Nevertheless, the Fed and the White House are determined to keep this rally going, so it’s risky to short the indexes.

For a much deeper analysis of the current market environment and steps you should take to protect your portfolio, read Lance Robert’s latest piece, The Bull is Back, but Will it Stay?: https://bit.ly/2VvPKUV

Bottom line: With the Fed meeting this week, the odds are good there will be some whiplash. No one knows how the market will react to the Fed, but the odds are also good the Fed will be very accommodating. The danger is that the market bubble will continue to grow, increasing the risks of a major dislocation in the future.

Daily Intraday Volatility: Low (VIX is in the basement again at 12.09)

Comment: The market (SPX) hardly moved in the last week, ending the week close to where it started. Volume was extremely low, which tells me most investors are taking a “wait and see” approach.

The indexes are near their all-time highs, volume is low, volatility is extremely low, the market is overbought, and we’re close to the longest bull market in history. In addition, investors are starting to get bullish again (they always do at tops), which is a danger sign. I spoke to a few investors who believe the market is nearly invincible (and if it does plunge in the near future, it will “come back,” they say.)

Since I’m not in the prediction business, I can’t tell you what the market is going to do this week. But I can tell you that the danger signs are getting stronger. For now, with the market near its all time highs, we need to see if the bulls can blast through SPX 2900 and stay above. If it can, then SPX 3000 is within reach.

However, if the market fails to rise much higher than SPX 2900, I would not be surprised to see a substantial pullback. For now, however, it’s wise to “sit and wait” along with everyone else until the market makes up its mind which direction it wants to go.

Bottom line: This is the time to be patient and watch the clues, the trend, and your favorite indicators. Keep in mind these are very unusual times so be prepared for the unexpected. Some old-timers told me they have never seen a market this complacent.

Comment: Last week, the market meandered around for four days until Friday, when it broke out to SPX 2900. Not surprisingly, institutional money managers are downright giddy and investors are bullish again (according to AAII and Investors Intelligence sentiment surveys). Typically, investors get bullish at tops and bearish at bottoms, so it’s best to be cautious at these overbought levels.

It’s emotionally difficult to sit on the sidelines when the market is sitting near all-time highs and other investors are making money. It might be difficult, but taking profits and increasing cash is exactly what prudent investors do. This ride to the top is fun, but one of these days there will an elevator ride to the bottom. Until then, be cautious. No one knows if the indexes will break out to all-time highs or retreat. Suggestions: Prepare for both scenarios by taking money off the table. Then diversify or hedge.

Bottom line: I have no idea what is going to happen this week (it’s also a four-day week). The odds are good that the bull market will continue a bit longer, which is the ideal time to take profits. As short sellers have learned the hard way over the last ten years, just because the market is overbought (it is extremely overbought right now) doesn’t mean it will reverse direction anytime soon. In fact, betting on the reversal has been a lonely and unprofitable exercise, at least for nearly ten years.

However, when the indexes do reverse direction one day in the future, it is going to be an epic plunge, one that could last years. That is why it’s so important to read about bear markets, to read books about and by Jesse Livermore, and to prepare for what will happen sometime in the future. Don’t forget that Livermore went broke at least three times betting against bull markets that were fueled by illegal (legal at the time, however) insider manipulation and buybacks, and questionable option strategies.

Don’t think we could crash again? Read the following thought-provoking piece by Lance Roberts, who points out that stock buybacks fed the latest 10-year bull market, but could also cause its demise. Here is a link to his must-read column: https://bit.ly/2UhXTrq

Comment: With help from the algos, the market was able to rally during the week, but on low volume and enthusiasm. The jobs number was excellent but the market yawned at the results, but managed to drift slightly higher.

By several measurements, the market appears to be in a bubble, yet most people don’t realize it. In fact, we won’t know it’s really a bubble until after it pops or deflates. Judging from history and experience, this is a bubble that will not end well (they never do). Unfortunately, no one knows when or how it will end. But all bubbles end, and all end badly and with a huge amount of pain for investors.

I admit I’ve been amazed this market bubble has grown so big and has continued for so long. Think about this: The Fed tried to let the air out of the market bubble by raising interest rates .25% in December, and the market plunged by 20%.

Since December, the market staged one of the greatest comebacks in history. With RSI at 70, we are definitely in overbought territory, so it won’t take much to send the indexes lower.

This weekend, the financial press was filled with positive stock market news, and some of the most bearish analysts are either throwing in the towel or saying “the market will go to SPX 3000 before it retreats.” Even those calling for a recession claim it won’t happen for at least two years.

If there is anything I know about the market, no one knows what is going to happen. Once you realize that no one knows anything, then you will take steps to diversify (if you are an investor) or hedge (if you are a trader). You might be giving up some profits when using hedge strategies but it’s better than losing your shirt when the market either #1. Plunges by 20% or more within a month or so, or #2. Rises to SPX 3000 before plunging by 20% or more.

Meanwhile, here’s a must read excerpt from Lance Robert’s column (his website is listed below). In particular, look at the SPX charts:

“There Is A Decent Probability You Have Never Seen A Bear Market

There is a sizable contingent of investors, and advisors, today who have never been through a real bear market. After a decade long bull-market cycle, which only seems to go up, you can certainly understand why mainstream analysis continues to believe the markets can only go higher.

What is concerning is the rather cavalier attitude the mainstream media takes about bear markets.

“Sure, a correction will eventually come, but that is just part of the deal.”

What gets lost during these bullish cycles, and is found in the most brutal of fashions, is the devastation caused to financial wealth during the inevitable decline.

Let’s look at the S&P 500 inflation-adjusted total return index in a different manner. The first chart shows all of the measurement lines for all the previous bull and bear markets with the number of years required to get back to even.

What you should notice is that in many cases bear markets wiped out essentially a substantial portion, if not all, of the previous bull market advance. This is shown more clearly when we look at a chart of bull and bear markets in terms of points.

Whether or not the current distribution phase is complete, there are many signs suggesting the current Wyckoff cycle may be entering its final stage of completion.

Let me remind you of something Ben Graham said back in 1959:

“‘The more it changes, the more it’s the same thing.’ I have always thought this motto applied to the stock market better than anywhere else. Now the really important part of the proverb is the phrase, ‘the more it changes.’

The economic world has changed radically and will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change. But if my cliché is sound, then the stock market will continue to be essentially what it always was in the past, a place where a big bull market is inevitably followed by a big bear market.

In other words, a place where today’s free lunches are paid for doubly tomorrow. In the light of recent experience, I think the present level of the stock market is an extremely dangerous one.”

He is right, of course, things are little different now than they were then.

For every “bull market” there MUST be a “bear market.”

The sell-off last year, which amazingly enough has already been forgotten, should have been a wake-up call to just how quickly things can change and how damaging they can be.

There is no difference between a 100% gain and a 50% loss.

(For the mathematically challenged: If the market rises from 1000 to 2000 it is a 100% gain. A fall from 2000 to 1000 is a 50% loss. Net return is 0%)

Understanding that investment returns are driven by actual dollar losses, and not percentages, is important in the comprehension of how devastating corrections can be on your financial outcome. So, before sticking your head in the sand and ignoring market risk based on an article touting “long-terminvesting always wins,” there is a huge difference between just making money and actually reaching your financial goals.

Comment: The market eked out a gain last week with help from the algos, which defended SPX 2800 every time it was threatened. The real action was in the bond market, where yields have plunged (and bond prices rallied) as many investors moved to the safety of Treasuries.

Once again, the market is overbought although not at extreme levels. It’s possible we’ll get a few more rally days but a reversal and pullback is imminent. Thus far, most investors (mostly index investors) are complacent and content without realizing the dangers that lie ahead. Warning signs are everywhere so it’s only a matter of time before volatility appears again and the indexes plunge. Nevertheless, it’s still too early to bet heavily against the market as it could go higher.

Bottom line: The indexes are getting into overbought territory again so a pullback is likely. Keep your eye on SPX 2800 as that is the line in the sand. When that breaks (and no one can predict when), it could be a nasty ride down. Futures are higher on Sunday night so watch and see if the rally will last.

Comment: The RSI went as high as 71 last week (70 is overbought) before plunging to 53.91 on Friday. SPX is currently resting at 2800, which is a major support level. It will be interesting to see if the bulls can hold 2800.

Fed Chairman Powell went beyond the usual dovishness and said that they would do anything to keep interest rates low and make Wall Street happy (my words). On Thursday, the indexes rallied on his kind words. On Friday, the indexes plunged.

Behind the scenes, institutional investors flocked to bonds for protection after U.S. bond yields inverted, a signal that many believe says a recession is near. It’s a warning sign, and although not perfect, it has signaled recessions in the past (the tricky part is the timing, as always). The inverted bond yield was enough to cause panic buying in bonds. Beginning now, be on the lookout for clues of a recession including job losses, poor housing sales, poor auto sales, and store closings.

If we get a recession with interest rates already low and debt so high, the Fed will really be in a quandary. And believe me, with stock prices at overbought levels, we could switch from buying on the dip to selling at any price. If you have huge gains from the stock market, it’s not a bad idea to take some money off the table, a decision only you can make.

Bottom line: All we can do is see if the bears take control again (they haven’t since December) or if the bulls can run this market even higher. No one, and I mean no one, can confidently predict what will happen this week.

Comment: The indexes had a slow but steady upward climb last week. It drove most traders crazy but the low volatility and lack of institutional buying keeps buy-and-hold investors calm. No one knows how long this manipulated market will keep going higher, but one day volatility will return again. The VIX is under 13 again, which reflects complacency and calmness. This can’t last forever.

Meanwhile, the Fed meets this week, and Powell will likely go out of his way to keep the good times coming. I doubt he’ll say anything to upset the market. Nevertheless, in the past, volatility has increased right after the Fed minutes are released on Wednesday.

After last week’s slow rally, the S&P 500 is overbought again, so a pullback would not be surprising. That being said, the algos are going to run the market as high as they can until something breaks.

Bottom line: It’s all about the Fed this week. Let’s see if volatility returns to the market, and whether Powell says anything besides, “I’ll do whatever it takes to keep Wall Street happy, and that means I will keep interest rates as low as possible as long as possible because I don’t want the stock market to plunge again.” (my quote but you get the idea).

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